The Indian textile industry has tremendous potential to increase its exports to the United States and the European Union markets through Sri Lanka post-2005.

The lifting of trade quota is expected to lead to a higher offtake of apparel from Sri Lanka. The progressive reduction in tariff and non-tariff barriers under the South Asian Free Trade Area programme would give Indian textile a dual advantage.

According to the Textile Export Promotion Council, the booming Sri Lankan apparel industry provides an ideal opportunity for Indian textile manufactures to export raw material in the form of fabrics and yarn (primarily cotton-based).

Despite a rise in exports of cotton textiles from India to Sri Lanka, India's share is not as high as it should be.

In case of cotton fabric, it is around 15 per cent and for yarn too the share can be raised, the report says. Thus there is great scope for Indian companies to export fabric and yarn.

Sri Lanka mainly imports textile raw materials such as cotton yarn and cotton fabric to support its conversion activity.

Sri Lanka imported $1.36 billion worth textiles during 2002 to support its garment industry. The lifting of trade quota from 2005 is expected to lead to a higher offtake of apparel from Sri Lanka to Europe and the US.

Sri Lanka will continue to remain an important supplier of apparel due to its inartistic advantage in relation to infrastructure, state-of-art manufacturing facilities and its reputation as supplier of niche and branded product especially in the fashion segment.

Given this scenario, abundant opportunities for developing a synergy for a mutual benefit between Indian suppliers of yarn and fabric and Sri Lankan manufactures of apparel product exist.

A greater collaboration will also open up avenues for the Sri Lankan apparel industry to look more positively at the emerging domestic Indian market in view of the progressive reduction in tariff and non-tariff barriers under the SAFTA programme.

There is a linkage between apparel export from Sri Lanka and the import of raw material as it does not have an integrated textile industry and unlike Bangladesh, it does not have any immediate plan to set up weaving and spinning capacity to support export growth in apparel.

What the Sri Lankan garment industry needs at the moment is to ensure the timely delivery of good quality fabric and yarn at internationally competitive prices.

India's vibrant cotton textile industry engaged in the production of a wide range of fabrics, home textile and yarn and having geographical proximity with Sri Lanka is an ideal choice for worldwide garment manufactures to meet the changing demand of Sri Lanka fashion.

The report suggests that both the countries should move away from the current strategy of exporting "production systems" and "quotas" and concentrate on building long-term capacities on the basis of joint ventures and investments.

It is worth noting that some of the Sri Lankan garment manufactures requested the Indian companies to set up weaving units in Sri Lanka.